A more balanced view towards global bank liquidity rules has given Australian banks some welcome breathing space as regulators slowly wake up the fact it is more important to stimulate growth than restrict it in the current environment.

The good news for the banks is a far more flexible and realistic set of rules than the original draft version.

Banks now have four more years than previously expected to share up their balance sheets and the types of assets that can be used as a buffer has been widened to include some types of bonds, shares and mortgage-backed securities.

While Australia’s banks are among the highest capitalised in the world, the new rules are significant as they apply to the liquidity of a financial institution’s assets which have been a weak point for the local industry.

The changes may solve the liquidity issues they faced, and at the very least gives them until 2019 to resolve the problem. The idea is that banks must have enough easily “sell-able" assets that they can offload in the time of a crisis to shore up their balance sheet. What defines a liquid asset has now been broadened significantly.

Australia’s banks can easily pass next year’s new Basel III capital rules with banks’ tier one capital ratios ratios between 7.5 and 8 per cent.

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While Australia’s financial institutions remain in relative good health compared to their offshore peers, regulators fear complacency could still be the industry’s undoing if there was an unexpected crisis. Debate on the issue flared late last year when the International Monetary Fund highlighted risks in the industry and suggested banks should have to carry more capital.

The question now is will the Australian Prudential Regulation Authority (APRA) shift its timetable in accordance with the new global rules or still make Australian banks stick to its original timetable?

Finding the right balance between growth and constraint remains challenging but the new Basel rules will provide some much-needed clarity and flexibility on the issue.